IT consultants are probably already feeling it:
the start of a rebound in business. But there's a difference this time. The
rebound is coming mostly in smaller deals rather than in gigantic ones.
That may be because businesses are dipping their feet in with jobs that just
can't wait before they dive into a recovery of which the depth is still
uncertain.
Case in point—IBM's (NYSE:IBM)
and Accenture's (NYSE:CAN) recent comments on their consulting businesses.
Talking about its overall quarterly results, IBM
said smaller deals are leading the day, both in services and software.
"Smaller deals are a significant portion of our total revenue stream, but
I think what we are seeing in smaller deals [has] been more characteristic of a
leading indicator," IBM Chief Financial
Officer Mark Loughridge told financial analysts during a conference call
discussing IBM's quarterly results. "So
as we entered the recession those smaller deals produce a little more
aggressively than we see them coming back, especially at the end of the
quarter."
At the same time larger deals tended to get rolled into the next quarter,
Loughridge told analysts.
Accenture Chairman and CEO Bill Green
offered a similar story to analysts during his company's quarterly conference
call at the end of 2009.
Technology
vendors acquired technology consulting companies at a quick pace in 2009,
including ACS and Perot Systems. Click here to see how these acquisitions fit
into the M&A landscape in 2009.
"The big transformational deals have not become
in vogue again yet," Green said, responding to an analyst's question. "People
are still putting their foot in the water, up to their ankles, up to their
knees. They are doing supply chain strategies, they are doing rationalizations,
they are doing all kinds of things, but that big billion-dollar
transformational thing that you see in the pipeline, those are a lot harder to
come by."
Instead, Green said customers are contracting for a higher volume of smaller
jobs.
"These are must-dos for these companies," Green said. "And
thanks to the consulting savvy that we have at the top of the business, I think
it puts us in a very good position to not only get those things done but also
benefit from downstream work that historically comes our way from those."
Financial analyst company Sanford Bernstein noted in a brief report that IBM's
total services signings were up 9 percent year over year—well above the analyst's
previous expectations.
"Services performance was encouraging, and IBM's
results and commentary add credence to a forthcoming recovery in consulting
services," Toni Sacconaghi, senior research analyst at Bernstein, said in
a report.
